SchifferLine 1 November 2015

Timely Real Estate News………………..1 November 2015

***********************************************************Fred Sands, 77, a legend in Southern California real estate, died on October 23, 2015. Carole Schiffer worked for Fred for more than 20 years in his headquarters office in Brentwood. Greatly saddened by his passing, Carole sent condolences to his family, about his contributions to her and to the industry:

“As I am sure you have heard millions of times, he was larger than life. Fred was a true Renaissance man in every sense of the word! He touched so many people in so many ways and truly made an impact on the City of Los Angeles, the real estate industry as a whole, and to our country. Personally, Fred helped me in so many ways that I cannot even begin to recall. He helped me grow into the person I am today. In some ways, he was like a father to me.. For all of the time I worked for Fred Sands Realtors, I was so VERY proud of that association, family, organization and company. He was an amazing person, and one I quote on a regular basis. We will miss him greatly.” — Carole Schiffer

******Pending Home Sales Lose Further Steam in SeptemberAccording to the National Association of Realtors, for the second straight month, pending homes sales lost further steam as the number of homes entering escrow fell in September to the second lowest index reading in 2015,. All four major regions experienced a pullback in activity in September. The Pending Homes Sales Index, an indicator based on contract signings, declined 2.3 percent to 106.8 in September from a slightly downwardly revised 109.3 in August but is still 3.0 percent above September 2014 (103.7). With last month’s decline, the index is now at its second lowest level of the year (103.7 in January), but has still increased year–over–year for 13 straight months.

Lawrence Yun, NAR’s chief economist, says a combination of factors likely led to September’s dip in contract signings. “There continues to be a dearth of available listings in the lower end of the market for first–time buyers, and Realtors® in many areas are reporting stronger competition than what’s normal this time of year because of stubbornly–low inventory conditions,” he said. “Additionally, the rockiness in the financial markets at the end of the summer and signs of a slowing U.S. economy may be causing some prospective buyers to take a wait–and–see approach.”

Despite contract activity softening from the more robust levels seen earlier this year, Yun believes the housing market will still likely be one of the brighter spots in the economy in coming months. “With interest rates hovering around 4 percent, rents rising at a near 8–year high, and job growth holding strong — albeit at a more modest pace than earlier this year — the overall demand for buying should stay at a healthy level despite some weakness in the overall economy.”

The PHSI in the Northeast fell 4.0 percent to 89.6 in September, but is still 3.9 percent above a year ago. In the Midwest the index declined 2.5 percent to 104.7 in September, but remains 4.3 percent above September 2014.

Pending home sales in the South decreased 2.6 percent to an index of 118.3 in September and are now 0.1 percent below last September. The index in the West inched back 0.2 percent in September to 104.4, but is still 6.6 percent above a year ago.“This reflects slowing in the national market,” Carole Schiffer stated, “but remember, Los Angeles’s Westside operates in somewhat different venue. As stated in my September figures in my October 15 SchifferLine, sales were still ahead of 2014 levels, and prices were holding their own in three out of the five communities I report on, while the other two were down only slightly.” Carole reports monthly on all MLS activity for the communities of Beverly Hills, Beverly Hills Post Office, Bel-Air, Westwood/Century City, and Brentwood.

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UCLA Anderson Forecast: Nation and Region to Remain HealthyThe forecast for the nation’s economic health is that at least for the next two years, it’s a “healthy one”. UCLA’s quarterly Anderson Forecast concluded there is a slim chance of a recession and a slight chance of a surge in growth. In California, the forecast remains largely unchanged since June. Growth in employment in California will continue, albeit it at a slower pace by 2017, as the unemployment rate falls to about 4.8%, similar to that of the nation as a whole.

The national forecast states the there is an 80% chance of an expansion that will continue for at least a couple more years and probably more due to other key factors: jobs, housing and cars. The modest gain in the employment to population ratio (3% more growth is expected to return to pre-recessionary levels) and the critical housing and automobile sectors are not yet in an overbuilt status. Therefore, when short-term interest rates do rise, sectors that are far from being overbuilt won’t likely crash. Though the rate of automobile sales has returned to 17 million units per year, Leamer points out that much of these sales reflect the replacement of older cars with new ones, indicating that the sector is not considered overbuilt.

According to the forecast, GDP growth is in the 2% to 3% range, better in 2016 than the year after. The forecast anticipates an improving labor market, a declining unemployment rate and a rising employment to population ratio. Yields on bonds will be driven upward with a rise of inflation by about one percentage point. The 3rd quarter GNP was down slightly to 1.5% from the estimated 1.6%.

The California Forecast — In the California report, the Anderson Forecast estimates total employment growth at 2.7% in 2015, 2.2% in 2016 and 1.4% in 2017. Real personal income growth is estimated to be 4.6% in 2015 and forecast to be 4.5% and 4.2% in 2016 and 2017, respectively. At the same time, the unemployment rate should drop below 6.0% through the balance of 2015. Unemployment will fall throughout the next year and will average 5.2% — unchanged from the June forecast. In 2017, UCLA expects the unemployment rate to be approximately 4.8%, same as in the U.S.

Housing is Back — In a companion to the national picture, the Anderson Forecast pointed out that after a long, difficult period, housing starts are poised to approach the long-term average (1959-2014) of just under 1.5 million units in 2016. The housing forecast calls for starts of 1.14 million units this year, 1.42 and 1.44 million units in 2016 and 2017, respectively. Even though this level of forecasted activity represents a level far below the mid-2000s boom level of more than two million units a year, there is reason to be optimistic. The forecast cited a continued economic expansion with low probability of a recession in the near-term, healthy employment growth of 200,000 new jobs monthly, rising household formations, relatively low mortgage rates and easing credit standards for mortgages.

Prices and existing home sales will continue to rise, despite higher interest rates in the forecast. The housing recovery is occurring under the backdrop of an unprecedented decline in homeownership. Homeownership now is where it was in 1989, yet this trend has about run its course and will soon begin reversing.

The flip side of declining homeownership rate is a rise in renting which has triggered a boom in multi-family housing starts. Multi-family housing starts, which bottomed in 2009 at 112,000 units will exceed 400,000 this year and average 460,000 units over the next two years. The high rental increases are being sustained by very low rental apartment vacancy rates. In fact, the Forecast stated that we are seeing a trend of investors purchasing new single-family houses for the rental market. However, affordability has become a real issue with the 46% of renters, compared to 40% ten years ago, paying more than 30% of their income on rent.

China Syndrome and Its Impact on Los Angeles’ Economy and Housing Market — UCLA Economist William Yu looked at the turmoil in China’s economy and the potential implications for Los Angeles’ economy noting that China’s economy was, is, and will be more volatile than suggested by Beijing’s official numbers. According to Yu, China’s economy, housing market, stock market, and currency are all in trouble. He went on to say that even though China has tried to contain its imploding crises, its economy has come to a restructuring crossroads. If it transitions smoothly to a service and consumption based economy, its medium growth rate could reach 5%. If not, its outlook will be more dismal, with 2-3% growth and an economy trapped in the middle income level.

The implication for Los Angeles is that China’s turmoil might reduce the growth of Los Angeles’ exports and tourism, but Chinese investment in Los Angeles real estate will persist due to better and safer expected returns in the U.S. Los Angeles’ housing market, despite becoming more expensive and unaffordable, is not in a bubble. Its housing prices are highly unlikely to bust this year or next.

*******************El Nino is coming! El Nino is coming! Get prepared. Now!Perhaps you noticed Hurricane Patricia streaking across Mexico, nearly missing Puerto Vallarta, and landed squarely in the Southeastern US….causing widespread flood damage, death and destruction. Cause? El Nino at work. It is possible that Northern California will get more rain than we in the Southland do, which would be great as we get our water from there. If El Nino moves north from Mexico, as we expect it will, we can expect the same kind of treatment Patricia inflicted on entire Southeast as well. So, now is the time to get your home in order. Here are some handy hints:

Check your balconies and deck slopes — make sure water flows away from the walls — not to them…

Watch out for ants….always come out in force after heavy rains….

Store emergency supplies and materials in a dry place (high the garage is good) and protect with plastic bags and coverings….and

Have extra food supplies, water, and yes, batteries in case roads are flooded or knocked out

Is it time for new tires? To maintain contact with the road in wet weather, tires “should have at least 50% of tread life left,” notes Dave Skaien, manager of the Automobile Club of Southern California’s Approved Auto Repair Program. “Otherwise, they can’t displace water through their grooves,” and contact may be lost.

Check your windshield wipers.. now is not the time to realize they cannot effectively clear your windshield of water.

Check your car lights.

Make sure your yard drains properly. If you’ve substituted impervious hard-scape, rock and decomposed granite for lawn in the last few years, the drainage pattern in your yard may have changed. Water that used to percolate through spongy grass will now flow. Landscape architect and USC adjunct professor Bob Perry advises placing 3 to 4 inches of organic mulch in beds and areas where water will drain or collect.

If ponding in your yard, balcony or patio becomes a problem, consider increasing the percentage of your yard that can absorb rainwater. Changes to the landscape may also have changed your property’s grading. Consulting an irrigation and drainage specialist can short-circuit any serious problems a heavy storm might cause.

Loosen compacted soil: Ground that has been allowed to dry out will repel water initially. Tilling in compost and covering with mulch will enable the ground to better absorb rain.

El Nino offers our parched Southern California salvation in many ways — but it’s also a harbinger of disasters on a very personal level around your neighborhood and property. Be prepared. Be careful….please

*******Please do not forget to check out my facebook page http://www.facebook.com/CaroleSchifferRealtor. I would love to add you as a friend.. And watch for the notice of my new website.. it will be launched in the next few days..caroleschiffer.com